Force-Placed Insurance Reform

In October 2011, the DFS launched a multi-pronged investigation into the force-placed insurance industry. Thus far investigations have found that:

The premiums charged to homeowners for force-placed insurance are two to ten times higher than premiums for voluntary insurance, even though the scope of the coverage is more limited.

Insurers and banks have built a network of relationships and financial arrangements that have driven premium rates to inappropriately high levels.

Force-placed insurers, rather than competing competed for business from banks and mortgage servicers by offering lower prices, have instead created incentives for banks and mortgage servicers to buy force-placed insurance with higher premiums by enabling the banks and mortgage services, through complex arrangements, to share in the profits associated with the higher prices.

Since then, the DFS has entered into settlements with major insurers that have included restitution for homeowners who were harmed, multi-million dollar penalties, and major reforms for their force-placed insurance programs in New York.

The DFS is also encouraging other force-placed insurers and mortgage servicers operating in New York to adopt similar reforms. DFS has also urged other state to implement these reforms, as evidenced by a Letter to all State Insurance Commissioners sent in April of 2013 urging them to help root out the kickback culture that has pervaded the force-placed insurance industry and lower rates for hard-working homeowners.